Hong Kong regulator in ‘active’ talks to introduce crypto ETF staking under new roadmap: HashKey

Hong Kong may soon see the introduction of staking services for crypto exchange-traded funds and other advanced products, such as derivatives trading, following the release of a new industry roadmap. Major local crypto firms are actively in talks with the region's top financial regulator, The Block has learned.HashKey, a major licensed crypto exchange in Hong Kong, is one of the many crypto players in frequent communication with the SFC. "We are actively discussing with the SFC the introduction of ETF staking and tokenized money market funds, as well as launching an 'Earn' feature alongside spot trading," Haiyang Ru, chief risk officer of HashKey Group, told The Block.The Hong Kong Securities and Futures Commission on Wednesday announced 12 initiatives, including exploring the possibility of new token listings, margin trading, derivatives, staking, borrowing and lending within the cryptocurrency industry.Hong Kong has opened its door to the crypto industry. In June 2023, it officially launched a crypto licensing regime for “virtual asset trading platforms,” allowing licensed exchanges to offer retail trading services. However, with the goal of becoming a crypto hub, the regulator is now seeking to accelerate crypto development, especially amid intensifying competition due to the pro-crypto stance of Donald Trump, who recently took office in the U.S."Very soon, some of the world's top liquidity providers will land in Hong Kong. Stay tuned," said Ru, who declined to provide more details.Ru also said that the consideration of staking would "enable HashKey Exchange to deliver secure and efficient staking services with support from HashKey Could."Alessio Quaglini, co-founder and CEO of Hex Trust, told The Block that institutional staking is poised to be a major area of interest in 2025, "as institutions that move into crypto custody will naturally seek yield-generating opportunities for their clients." Expanding product offeringsOSL, another major licensed crypto exchange in Hong Kong, has also observed increasing customer interest in a broader range of services, including yield-generating products and derivatives, said Gary Tiu, executive director and head of regulatory affairs at OSL.In terms of potential timeline, HashKey's Ru noted that the company hopes to introduce more advanced products — such as derivatives trading and margin financing — to professional investors in the second half of this year, provided that appropriate regulations are in place. "Once the market matures, these could gradually rollout to the retail," Ru said.Ru also pointed out that Hong Kong faces fierce competition from other crypto-friendly jurisdictions, where regulatory frameworks are also evolving. "We expect at least three major initiatives could be fulfilled within 2025 [in Hong Kong]," he added.Futu Securities, a brokerage in Hong Kong, also said that it's well-positioned to provide a wider range of choices for qualified retail investors once regulatory approval is granted. "We enthusiastically welcome the introduction of margin trading, derivatives, staking, and borrowing/lending services in crypto trading," Daniel Tse, managing director of Futu Securities International (Hong Kong) Ltd., told The Block.Futu is a regulated brokerage firm that also offers BTC, ETH, LINK and AVAX to the retail market. "For investors whose risk tolerance assessment scores do not meet requirements for crypto assets, we offer alternative crypto investing opportunities such as crypto ETFs and crypto-concept stocks on our platform," Tse said.Custodian licensingAs part of the roadmap, the SFC plans to establish licensing regimes for over-the-counter crypto trading and custodian services. “OTC desks, favored by institutions for conducting discreet large trades, operate with minimal transparency, thus heightening risks of market abuse,” the SFC wrote in the roadmap released Wednesday.These frameworks are expected to establish a level playing field, "ensuring that all custodians meet rigorous anti-money laundering scrutiny and security, capital adequacy, and asset segregation requirements," said Quaglini of Hong Kong-headquartered Hex Trust, which offers institutional crypto custody, staking and markets services to builders and service providers."While retail investor protection remains a priority, what will position Hong Kong as a global leader is its efforts to develop a digital asset hub for institutional investors — spanning custody, liquidity, lending, borrowing and staking," said Quaglini. "We believe the roadmap has a very positive impact on the crypto industry in Hong Kong," said Ru of HashKey.Disclaimer: The Block is an independent media outlet that delivers news, research, and data. 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